Terry Smith, manager of the ￡24bn Fundsmith Equity fund, is perhaps the closest the UK has to an investment superstar – even if he does spend most of his time in Mauritius.

While his focus on buying “quality” companies at reasonable prices has not been in vogue with markets over the last few years, his new purchases are always of interest. Even more so when he is joining many of the world’s top-performing fund managers that already hold the stock.

That’s the case with Swedish industrial equipment maker Atlas Copco, in which Smith built a small stake last month. Financial publisher Citywire has identified 11 of the world’s best-performing fund managers, each among the top 3pc of over 10,000 equity managers globally, also holding the shares.

The level of backing from these top managers is high, resulting in Atlas Copco being awarded a top AAA Elite Companies rating by Citywire, which rates companies based on smart-money ownership.

Atlas’ historic financial performance speaks volumes about what has attracted Smith and others.

What investors are generally referring to when they talk about “quality” is a company’s ability to consistently create value for its owners through investments made in its business.

A favourite way to measure this, including for Smith, is a company’s return on capital employed (ROCE). This represents operating profit as a percentage of money invested in business operations.

Atlas Copco clearly understands the significance of this measure for shareholders, as its impressive 30pc ROCE is cited throughout its 2023 annual report. It’s no flash in the pan.

Aside from 2020, when a pandemic hit caused ROCE to slip to 23pc, the figure has consistently rested at or above 27pc since 2015. (2015 is the first year that numbers are available adjusted for the SEK107bn (￡8.1bn) spin out of mining-equipment business Epiroc.)

A key reason for the high ROCE is the company’s focus on only investing where it feels it can add real value. This approach means only making critical machine components while buying the rest from suppliers. This results in just a quarter of overall manufacturing costs being incurred “in house”, including assembly.

As well as keeping operations asset light, the model allows costs to be reduced quickly when the business cycle turns downward. The company also insulates itself from the inevitable economic ups and downs experienced by customers by focusing on supplying critical equipment where purchasing decisions are based more on necessity than choice.

In addition, 35pc of sales are from services, including supplying replacement parts and consumables, which experience relatively stable demand.